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ALPHA SIP: Algorithm based investing in mutual funds

Before we start, this is NOT a sponsored post. Trust me, because I’d be really happy if it were. But this one is not. Secondly, I am assuming that you already know what SIP, mutual funds are. In case you don’t, please use this as a pre read.

So the latest buzz words in the tech industry are Artificial intelligence and Machine learning. And how can Finance industry stay away from them? After the rise of Robinhoods, fintech industry is on a boom.

I recently came across one such product that claims to extract the maximum out of these buzzwords and helps us gain maximum returns. The product is called Alpha SIP and the company is finpeg.

Alpha SIP a digital age investing

What is alpha SIP?

Before we go to Alpha SIP, let’s understand what alpha is. Alpha is your additional return you make over the benchmark. So Alpha SIP is a product that intends to beat benchmarks while you are investing in mutual funds.

How is it different from traditional SIP?

The very basis of traditional SIPs is that you average out your lows by maintaining the financial discipline and investing regularly. But, that averaging out works both ways. There is NO intelligence build behind the entry and exit point. An SIP will continue to invest your money in the equity stock market irrespective of the conditions.

Enter Alpha SIP: Alpha SIP uses multiple algorithms based in market P/E, P/B, Market CAP, GDP to decide best entry point, funds to allocate in, and exit point for your money. Quoting an example I came across while researching on it, what if there is a SIP that reallocates your money to debt funds when market is overvalued (PE>25) and enters back into equity when market is undervalued (PE<15)? Alpha SIP does exactly that.

Alpha SIP: Some numbers to back it up

Comparing the performance of a mutual fund that invests in NIFTY 50 via a regular SIP and Alpha SIP for a period of 5 years.

Alpha SIP returns Vs Conventional SIP

So not only you earn a significant ‘Alpha’ over your investment, it also protects your returns in a bearish scenario. Also, considering the last column in the comparison is important because exposing yourself to equity markets and its risks should fetch you at least more than a bank FD.

Reviews:

An investor must gauge all the aspects of an instrument before jumping into it. Hence, I tried to read reviews of Alpha SIP on reddit, YouTube. Prima facie, people have been saying that it did save them during downfall of the market but they are yet to see its benefits in upside.

Conclusion:

This is not an investment advice by any means and you should conduct your due diligence and talk to your advisor before investing. I personally am quite excited about this product. But before I plan to invest, there are a couple of things that I need to sort out:

  • As a company, I haven’t heard about finpeg much given the fact that they have been around for a while now.
  • If this product is so revolutionary and fool proof, why aren’t more and more people talking about it?
  • In toto Alpha SIP can be seen as a better fund management strategy based on algorithms rather than a product itself. But it is marketing very smartly otherwise.

Probably a little more research will nudge me in investing their products. For now, I will keep it on a hold with high probability of conversion.

Until next time..

Update:

I downloaded the finpeg application to explore more about the product. A really odd thing I felt is that instead of giving you the details up front, they insist you to talk to their financial advisors.

So, I landed on a page where the only option is to leave your details and the advisor will get in touch. Unlucky for them, I do gauge a company’s service by the fact if I were called on the committed time or not. I work closely with our BPO team and know for a fact, that this is a hard one to crack. Turns out, I didn’t get a callback on the stipulated day. Rather I got it on the next day.

I asked the advisor to call me back in a couple of hours, which he did, but after 6 hours. If the sales team is not serious about customers, I don’t think service team is ever gonna care.

So far, I agree that this might not be a deal breaker yet. Until, he told me, for this algorithm to work minimum SIP amount should be staggering 20k a month. So, they lose many retail investors including me on this note. For a lumpsum investment, they would need a minimum of 1 lac rupees.

So here is your missing piece of the puzzle. I did mention above that if this works, why isn’t it a big hit yet? Finally got the answer. I now understand why you are referred to a financial advisor ONLY and cannot invest immediately like other fintech platforms. I am still curious about the algorithm. So if you decide to go ahead with the product, let me know if it worked or not.

rgvdudeja
A techno manager by profession and a hardcore geek at heart. I love to poke my nose into tasks where other usually gave up on. My hobbies include, reading about latest trends in tech industry, playing guitar and yes, memes!
http://pandatechiein.wordpress.com

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